Investors often overlook SEC filings, and it is the job of the 10Q Detective to dig through businesses’ 8-K and 10-Q SEC filings, looking for financial statement ‘soft spots,'(depreciation policies, warranty reserves, and restructuring charges, etc.)that may materially impact Quality of Earnings.

Friday, May 02, 2014

Biotech Losers of 2013: AVEO, INFI, AFFY, and ARIA -- Where Are They Now?

Despite having lost more
than 90% of its market valuation in the last 21 months, AVEO Pharma’s (AVEO-$1.24) management believes it can drive shareholder
creation by moving forward with other early-stage, oncology assets, principally
by securing partnerships after providing proof-of-concept data. Though
attractive commercial opportunities do exist, even in highly competitive
markets, for targeted cancer therapies, we question this management team’s
ability to develop their putative “first-in-class clinical assets”
following the debacle of the VEGF receptor tyrosine kinase inhibitor,
tivozanib, last year.

EvolvingPhase 1 data presented at
the American Society of Hematology (ASH) meetingheld in early December 2013 showed not only that earlier safety concerns
on Infinity’s (INFI-$9.20) lead
asset, IPI-145, had been overblown, but that the drug demonstrated impressive
efficacy in patients with either relapsed or refractory CLL (81% of patients
had been treated with three or more systemic therapies), too.

Unfortunately, we’ll never
know the “would of, could of” commercial potential for Affymax’s (AFFY-$0.70) anemia treatment, brand-name Omontys. After
posting sales of $34.6 million for the nine-month period ending December 31,
2012 – slightly below analyst forecasts, suggestive of the contract-grip Amgen
held on dialysis centers – Omontys was recalled on February 23, 2013 following
reports of severe hypersensitivity reactions including anaphylaxis in 0.2% (or
about 50 patients) — including fatal reactions in 0.02% of the 25,000 patients
–within 30 minutes of their first IV dose in the post-marketing phase. Almost a
third of the reported cases required prompt medical intervention and in some
cases hospitalization, according to anFDA safety alertissued at the time.

Though the stock price
of Ariad Pharma (ARIA-$7.25) has
rallied off its 52-week low of $2.15 per share (October 31, 2013) to the $7.00
level, it still trades significantly below its 52-week high of $23.00
(September 11, 2013). The relief rally has stalled for two reasons:

Iclusig competes in an already
crowded market for just two rare cancers. According to National Cancer
Institute statistics, approximately 5,200 new cases of CML and 1,800 new
cases of Ph+ ALL are diagnosed each year in the United States; and,

Ariad has discontinued – after
consulting with the FDA – its EPIC trial, which had been designed to
investigate the use of Iclusig in the front-line settings.

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About Me

Prior to founding the 10Q Detective, I held equity analyst positions with three brokerage firms and published the investment newsletter e-Growth Profit Letter - dedicated to uncovering companies with innovative, proprietary technologies in a range of industries. My work has been published in The Dick Davis Digest, The Bull & Bear Financial Report, BusinessWeek, CBS Interactive, Forbes, Kiplingers Personal Finance, MSN Money, TheStreet.com, 24/7 Wall Street, The Wall St. Journal, The International Herald Tribune, and Investors Business Daily.
The 10Q Detective is recommended as a 'Must-Read' money blog in Kiplingers (Oct. 2006 & May 2008), Washington Post (May 2009); a 'Best of Financial Blog' by BusinessWeek (Feb. 2007 & April 2008),a 'Smart Stop' by The Journal of Accountancy (March 2008); 'Top 25' by Time magazine, a 'Top 50 Money Blog' by CurrencyTrading.net (April 2008); and, a 2011 LexisNexis Business Law Blog Nominee.